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8-K - LIVE FILING - CHINDEX INTERNATIONAL INC | htm_43452.htm |
EX-99.2 - EX-99.2 - CHINDEX INTERNATIONAL INC | exhibit2.htm |
FOR RELEASE November 8, 2011
Contact: ICR, Inc.
Ashley De Simone
(646) 277-1227
Chindex International, Inc. Reports Financial Results for the
Third Quarter and First Nine Months of 2011
Bethesda, Maryland November 8, 2011 - Chindex International, Inc. (NASDAQ: CHDX), an American health care company providing health care services in China through the operations of United Family Healthcare, a network of private primary care hospitals and affiliated ambulatory clinics, today announced financial results for the third quarter and first nine months of 2011 ended September 30, 2011.
Third Quarter 2011 Financial Highlights
| Revenue from healthcare services increased 23% to $28.8 million from $23.4 million in the prior year period. |
| Adjusted EBITDA rose to $4.3 million, compared to Adjusted EBITDA of $3.5 million in the prior year period. |
| Income from operations was $490,000 compared to $4.8 million in the prior year period. |
| Net income was $315,000, or $0.02 per diluted share, compared to net income of $3.2 million, or $0.20 per diluted share, in the prior year period. |
| Development, pre-opening and start-up expense was $2.4 million compared to $653,000 in the prior year period. |
Roberta Lipson, President and CEO of Chindex, commented, We are pleased with the strong revenue and profitability growth achieved during the third quarter of 2011. Revenue rose 23% year-over-year to $28.8 million, putting Chindex well on-track to deliver mid-teens revenue growth for the full year of 2011. Furthermore, we saw our Adjusted EBITDA grow 23% year-over-year to $4.3 million demonstrating our ability to generate strong returns for shareholders through our existing facilities.
We are also pleased with the progress of our hospital expansion plans, our primary focus in 2011, Ms. Lipson continued. Chinas hospital services market is heavily regulated by government licensing and approval. This means that there is a certain level of volatility built into the system. We are proud of our teams ability to navigate the complicated approval and construction process. At the same time, we will adapt our guidance of expansion timelines to better fit market dynamics by focusing on progress of near term projects. We continue to be extremely excited by our ongoing projects. They will enhance our current facilities with added capacity and service offerings and are well-timed to capitalize upon current policy support for private investment in healthcare as well as the growing affluence of Chinas population.
Third Quarter 2011 Financial Results
Third quarter 2011 revenue from healthcare services increased 23% to $28.8 million from $23.4
million in the prior year period, reflecting continued growth of inpatient and outpatient volume
across the United Family Healthcare network as well as nascent contributions from the phased
opening of the Beijing United Family expansion. Outpatient services contributed 58% of revenue and
inpatient services contributed 42% of revenue in the third quarter of 2011, compared to 60% and
40%, respectively, in the year ago period. By service line, surgical services contributed 19%,
OB/GYN contributed 16%, pediatrics contributed 7%, ancillary services contributed 33% and other
services contributed 25% of revenue.
Operating expenses for the three months ended September 30, 2011 increased 34% to $28.3 million from $21.1 million in the prior year period primarily reflecting the Companys ongoing expansion efforts. Salaries, wages and benefits in the third quarter of 2011 increased 30% to $16.5 million from $12.7 million in the prior year period reflecting a 20% increase in headcount to drive revenue growth and support development activities. Development, pre- and post-opening and start up expenses for the Beijing United expansion, Shanghai Pudong expansion, Tianjin United project and Beijing United Family Rehabilitation Hospital were $2.4 million this quarter. Operating expenses also included certain non-cash expenses including $878,000 of stock compensation expense compared to $375,000 for the prior year period.
Adjusted EBITDA in the third quarter of 2011 increased to approximately $4.3 million compared to $3.5 million in the prior year period driven by strong revenue growth and consistent profitability of existing facilities.
Income from operations was $490,000 compared to income from operations of $4.8 million in the prior year period.
The Company recorded a $791,000 provision for taxes in the third quarter of 2011 compared to a provision for taxes of $1.5 million in the prior year period.
Net income for the quarter ended September 30, 2011 was $315,000, or $0.02 per diluted share, compared to $3.2 million, or $0.20 per diluted share, in the prior year period. For the third quarter of 2011, weighted average diluted shares outstanding were 17.3 million.
First Nine Months of 2011 Financial Results
During the first nine months of 2011, revenue from healthcare services increased 19% to $82.5
million from $69.3 million in the prior year period, reflecting growing inpatient and outpatient
volume across the United Family Healthcare network. Outpatient services contributed 59% of revenue
and inpatient services contributed 41% of revenue in the first nine months of 2011 compared to 60%
and 40%, respectively, in the year ago period. By service line, surgical services contributed 18%,
OB/GYN contributed 15%, pediatrics contributed 8%, ancillary services contributed 33% and other
services contributed 26% of revenue.
Operating expenses for the first nine months of 2011 increased 26% to $78.9 million from $62.8 million in the prior year period primarily due to increased staffing, office and administrative supplies associated with the Companys ongoing development and expansion plans. Development, pre-opening and start up expenses, including post-opening expenses, rose to $5.2 million from $1.5 million in the prior year period primarily as a result of expenses related to the Companys Beijing, Pudong and Tianjin projects. Operating expenses also included certain non-cash expenses including $2.5 million of non-cash stock compensation expense.
Adjusted EBITDA was approximately $12.8 million compared to $9.8 million in the prior year period.
Income from operations was $3.6 million compared to income from operations of $7.9 million in the prior year period.
Provision for taxes was $2.9 million compared to $3.3 million in the prior year period.
Net income was $2.0 million, or $0.13 per diluted share, compared to net income of $4.6 million, or $0.29 per diluted share, in the prior year period. For the first nine months of 2011 ended September 30, 2011, weighted average diluted shares outstanding were 17.4 million.
As of September 30, 2011, the Company had $67.4 million in cash and cash equivalents and investments.
Non-GAAP Measures
The Company presents Adjusted EBITDA to better illustrate ongoing operational results. Adjusted EBITDA is defined as income (loss) before interest expense, income taxes, depreciation and amortization, and also excludes development, pre-opening and start-up expenses related to new and pending hospitals and clinics, equity in earnings (loss) income of unconsolidated affiliate, non-recurring charges for Chindex Medical Limited (CML) joint venture formation and effect of change in corporate cost allocations. The Company anticipates recurring development, pre-opening and start-up expense and notes that such expense is a basic element of the long term growth plan. Management believes that providing an Adjusted EBITDA analysis to investors is a helpful metric to better illustrate the Companys operations, including development plans, and changes in presentation from historical periods. The Company uses Adjusted EBITDA for business planning and other purposes. Other companies may calculate Adjusted EBITDA differently, and therefore Chindexs Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Adjusted EBITDA is not a measure of financial performance under U.S. generally accepted accounting principles (GAAP), and should not be considered in isolation or as an alternative to net income (loss), cash flows from operating activities and other measures determined in accordance with GAAP. Items excluded from Adjusted EBITDA are significant and necessary components to the operations of the Companys business, and, therefore, Adjusted EBITDA should only be used as a supplemental measure of operating performance.
Chindex Medical Limited
The Chindex Medical Limited joint venture (CML) between FosunPharma and Chindex International began
operations on January 1, 2011. The strategic venture merged the former Medical Products division of
Chindex International and select medical device companies of FosunPharma. FosunPharma owns 51% and
Chindex owns 49% of the CML joint venture. Chindex recognizes its 49% interest in CMLs net income
using the equity method of accounting.
Accordingly, for the quarter and nine months ended September 30, 2011, the Company recognized $539,000 and $1.1 million, respectively, for its 49% share of CML. In recognizing its 49% interest in the net income of CML for the quarter, Chindex also included additional expenses for amortization of certain fair value adjustments made in connection with the formation of the joint venture.
Conference Call
Management will host a conference call at 8:00 am ET on November 9, 2011, to discuss financial
results. To participate in the conference call, U.S. domestic callers may dial 1-877-303-9231 and
international callers may dial 1-760-666-3567 approximately 10 minutes before the conference call
is scheduled to begin. A telephone replay will be available from the day of the call until November
16, 2011 by dialing (U.S. domestic) 1-855-859-2056 or (international) 1-404-537-3406, passcode
20653790. A webcast of the earnings call will be accessible via Chindexs website at
http://ir.chindex.com/events.cfm.
About Chindex International, Inc.
Chindex is an American health care company providing health care services in China through the
operations of United Family Healthcare, a network of private primary care hospitals and affiliated
ambulatory clinics. United Family Healthcare currently operates in Beijing, Shanghai and Guangzhou.
The Company also provides medical capital equipment and products through Chindex Medical Ltd., a
joint venture company with manufacturing and distribution businesses serving both domestic China
and export markets. With thirty years of experience, the Companys strategy is to continue its
growth as a leading integrated health care provider in the Greater China region. Further company
information may be found at the Companys website at http://www.chindex.com.
Safe Harbor Statement
Statements made in this press release relating to plans, strategies, objectives, economic
performance and trends and other statements that are not descriptions of historical facts may be
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended
(the Exchange Act). Forward-looking information is inherently subject to risks and uncertainties,
and actual results could differ materially from those currently anticipated due to a number of
factors, which include, but are not limited to, the factors set forth under the heading Risk
Factors in the Companys Transition Report on Form 10-K for the nine months ended December 31,
2010, updates and additions to those Risk Factors in the Companys interim reports on Form 10-Q,
Forms 8-K and in other documents filed by us with the Securities and Exchange Commission from time
to time. Forward-looking statements may be identified by terms such as may, will, should,
could, expects, plans, intends, anticipates, believes, estimates, predicts,
forecasts, potential, or continue or similar terms or the negative of these terms. Although
the Company believes that the expectations reflected in the forward-looking statements are
reasonable, the Company cannot guarantee future results, levels of activity, performance or
achievements. The Company has no obligation to update these forward-looking statements.
Financial Summary Attached
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands except share and per share data)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||
Revenue | ||||||||||||||||||||
Healthcare services revenue | $ | 28,815 | $ | 23,361 | $ | 82,465 | $ | 69,278 | ||||||||||||
Product sales | - | 21,813 | - | 58,640 | ||||||||||||||||
Total revenue | 28,815 | 45,174 | 82,465 | 127,918 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||
Healthcare services: |
||||||||||||||||||||
Salaries, wages and benefits |
16,540 | 12,718 | 46,768 | 38,364 | ||||||||||||||||
Other operating expenses |
4,962 | 3,962 | 13,518 | 10,615 | ||||||||||||||||
Supplies and purchased medical services |
3,247 | 2,281 | 9,109 | 6,915 | ||||||||||||||||
Bad debt expense |
466 | 198 | 1,396 | 1,139 | ||||||||||||||||
Depreciation and amortization |
1,459 | 955 | 3,653 | 2,762 | ||||||||||||||||
Lease and rental expense |
1,651 | 1,009 | 4,450 | 2,969 | ||||||||||||||||
28,325 | 21,123 | 78,894 | 62,764 | |||||||||||||||||
Products: | ||||||||||||||||||||
Product sales costs | - | 15,111 | - | 41,308 | ||||||||||||||||
Product selling and other operating expenses | - | 4,109 | - | 15,987 | ||||||||||||||||
- | 19,220 | - | 57,295 | |||||||||||||||||
Total operating expenses | 28,325 | 40,343 | 78,894 | 120,059 | ||||||||||||||||
Income from operations | 490 | 4,831 | 3,571 | 7,859 | ||||||||||||||||
Other income and (expenses) | ||||||||||||||||||||
Interest income |
192 | 108 | 552 | 410 | ||||||||||||||||
Interest expense |
(109 | ) | (212 | ) | (290 | ) | (619 | ) | ||||||||||||
Equity in income of unconsolidated affiliate |
539 | | 1,121 | | ||||||||||||||||
Miscellaneous (expense) income net |
(6 | ) | 7 | (73 | ) | 238 | ||||||||||||||
Income before income taxes | 1,106 | 4,734 | 4,881 | 7,888 | ||||||||||||||||
Provision for income taxes | (791 | ) | (1,497 | ) | (2,853 | ) | (3,300 | ) | ||||||||||||
Net income | $ | 315 | $ | 3,237 | $ | 2,028 | $ | 4,588 | ||||||||||||
Net income per common share basic | $ | .02 | $ | .21 | $ | .13 | $ | .31 | ||||||||||||
Weighted average shares outstanding basic | 16,134,459 | 15,213,124 | 16,113,426 | 14,908,644 | ||||||||||||||||
Net income per common share diluted | $ | .02 | $ | .20 | $ | .13 | $ | .29 | ||||||||||||
Weighted average shares outstanding diluted | 17,250,548 | 16,582,181 | 17,411,770 | 16,371,293 | ||||||||||||||||
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands except share data)
September 30, 2011 | December 31, 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 27,554 | $ | 32,007 | ||||
Restricted cash |
| 300 | ||||||
Investments |
39,294 | 37,631 | ||||||
Accounts receivable, less allowance for doubtful accounts of $8,220 and
$6,748,
respectively |
14,272 | 11,601 | ||||||
Receivables from affiliate |
6,417 | 9.330 | ||||||
Inventories, net |
1.763 | 1,413 | ||||||
Deferred income taxes |
4,259 | 3,242 | ||||||
Other current assets |
2,836 | 3,856 | ||||||
Total current assets |
96,395 | 99,380 | ||||||
Restricted cash and sinking funds |
1,021 | 980 | ||||||
Investments |
507 | 2,439 | ||||||
Investment in unconsolidated affiliate |
32,877 | 31,756 | ||||||
Property and equipment, net |
50,930 | 37,099 | ||||||
Noncurrent deferred income taxes |
471 | 108 | ||||||
Other assets |
2,965 | 2,411 | ||||||
Total assets |
$ | 185,166 | $ | 174,173 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 3,314 | $ | 4,038 | ||||
Payable to affiliate |
946 | | ||||||
Accrued expenses |
10,620 | 8,541 | ||||||
Other current liabilities |
4,885 | 3,874 | ||||||
Income taxes payable |
1,948 | 2,147 | ||||||
Total current liabilities |
21,713 | 18,600 | ||||||
Long-term debt and convertible debentures |
23,669 | 23,070 | ||||||
Long-term deferred tax liability |
431 | 431 | ||||||
Total liabilities |
45,813 | 42,101 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $.01 par value, 500,000 shares authorized, none issued |
| | ||||||
Common stock, $.01 par value, 28,200,000 shares authorized, including
3,200,000 designated Class B: |
||||||||
Common stock 15,630,018 and 15,310,426 shares issued and
outstanding at September 30, 2011 and December 31, 2010,
respectively |
156 | 153 | ||||||
Class B stock 1,162,500 shares issued and outstanding at September
30, 2011 and December 31, 2010, respectively |
12 | 12 | ||||||
Additional paid-in capital |
118,369 | 115,815 | ||||||
Accumulated other comprehensive income |
7,498 | 4,802 | ||||||
Retained earnings |
13,318 | 11,290 | ||||||
Total stockholders equity |
139,353 | 132,072 | ||||||
Total liabilities and stockholders equity |
$ | 185,166 | $ | 174,173 | ||||
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Nine months ended September 30, | ||||||||
2011 | 2010 | |||||||
OPERATING ACTIVITIES |
||||||||
Net income |
$ | 2,028 | $ | 4,588 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
3,653 | 2,946 | ||||||
Provision for demonstration inventory |
| 463 | ||||||
Inventory write down |
6 | 75 | ||||||
Provision for doubtful accounts |
1,396 | 1,284 | ||||||
Loss on disposal of property and equipment |
78 | 61 | ||||||
Equity in income of unconsolidated affiliate |
(1,121 | ) | | |||||
Deferred income taxes |
(1,257 | ) | 116 | |||||
Stock based compensation |
2,547 | 1,893 | ||||||
Foreign exchange (gain) loss |
(482 | ) | 923 | |||||
Amortization of debt issuance costs |
7 | 7 | ||||||
Amortization of debt discount |
186 | 186 | ||||||
Non-cash charge for change in fair value of warrants |
| (224 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Restricted cash |
300 | (1,113 | ) | |||||
Accounts receivable |
(3,511 | ) | 5,983 | |||||
Accounts receivable from affiliate |
2,913 | | ||||||
Inventories |
(290 | ) | (4,231 | ) | ||||
Other current assets and other assets |
623 | (185 | ) | |||||
Accounts payable, accrued expenses, other current liabilities and deferred revenue |
(3,859 | ) | 1,254 | |||||
Accounts payable to affiliate |
946 | | ||||||
Income taxes payable |
(257 | ) | (933 | ) | ||||
Net cash provided by operating activities |
3,906 | 13,093 | ||||||
INVESTING ACTIVITIES |
||||||||
Purchases of short-term investments and CDs |
(23,518 | ) | (6,208 | ) | ||||
Proceeds from redemption of CDs |
24,179 | 22,341 | ||||||
Purchases of property and equipment |
(9,743 | ) | (12,967 | ) | ||||
Net cash (used in) provided by investing activities |
(9,082 | ) | 3,166 | |||||
FINANCING ACTIVITIES |
||||||||
Repayment of debt, sinking fund deposits and vendor financing |
| (1,748 | ) | |||||
Repurchase of restricted stock for income tax withholding |
(104 | ) | (943 | ) | ||||
Proceeds from issuance of common stock |
| 13,803 | ||||||
Proceeds from exercise of stock options and warrants |
114 | 577 | ||||||
Net cash provided by financing activities |
10 | 11,689 | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents |
713 | 871 | ||||||
Net (decrease) increase in cash and cash equivalents |
(4,453 | ) | 28,819 | |||||
Cash and cash equivalents at beginning of period |
32,007 | 23,760 | ||||||
Cash and cash equivalents at end of period |
$ | 27,554 | $ | 52,579 | ||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid for interest |
$ | 649 | $ | 641 | ||||
Cash paid for taxes |
$ | 4,433 | $ | 4,770 | ||||
Non-cash investing and financing activities consist of the following: |
||||||||
Property and equipment additions included in accounts payable |
$ | 6,304 | $ | 1,497 | ||||
Cashless exercise of warrants at fair value |
$ | | $ | 800 | ||||
Exercise of warrants at fair value |
$ | | $ | (201 | ) |
The table below reconciles our consolidated net income to Adjusted EBITDA (in thousands)
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Consolidated net income |
$ | 315 | $ | 3,237 | $ | 2,028 | $ | 4,588 | ||||||||
Adjustments: |
||||||||||||||||
Depreciation and amortization |
1,459 | 955 | 3,653 | 2,762 | ||||||||||||
Provision for income taxes |
791 | 1,497 | 2,853 | 3,300 | ||||||||||||
Interest expense |
109 | 212 | 290 | 619 | ||||||||||||
Interest and other income, net |
(186 | ) | (115 | ) | (479 | ) | (648 | ) | ||||||||
Development, pre-opening and start-up expense |
2,392 | 653 | 5,182 | 1,454 | ||||||||||||
Equity in earnings of unconsolidated affiliate |
(539 | ) | | (1,121 | ) | | ||||||||||
Non-recurring charges for CML JV formation |
| | 400 | | ||||||||||||
Effect of change in corporate cost allocations |
| (325 | ) | | (975 | ) | ||||||||||
4,026 | 2,877 | 10,778 | 6,512 | |||||||||||||
Adjustments to exclude Medical Products Division: |
||||||||||||||||
Medical Products revenue |
| (21,813 | ) | | (58,640 | ) | ||||||||||
Medical Products cost of products sold |
| 15,111 | | 41,308 | ||||||||||||
Medical Products selling and operating expenses |
| 4,109 | | 15,987 | ||||||||||||
| (2,593 | ) | | (1,345 | ) | |||||||||||
Adjusted EBITDA |
$ | 4,341 | $ | 3,521 | $ | 12,806 | $ | 9,755 |